文档介绍：International Economics Chapter 14 Money, Interest Rates, and Exchange Rates
Chapter 14
Money, Interest Rates, and Exchange Rates
Kernel of the Chapter
The Demand for Money
The Equilibrium Interest Rate: The Interaction of Money Supply and Demand
The Money Supply and the Exchange Rate in the Short Run
Money, the Price Level, and the Exchange Rate in the Long Run
Inflation and Exchange Rate Dynamics
Introduction
This bines the foreign-exchange market with the money market to determine the exchange rate in the short run3>.
It analyzes the long-term effects of ary changes on output prices and expected future exchange rates.
Money Defined: A Brief Review
Money as a Medium of Exchange
A generally accepted means of payment
Money as a Unit of Account
A widely recognized measure of value
Money as a Store of Value
A transfer of purchasing power from the present into the future
Money Defined: A Brief Review
What Is Money?
Assets widely used and accepted as a means of payment.
Money is very liquid, but pays little or no return.
All other assets are less liquid but pay higher return.
Money Supply (Ms)
Ms = Currency + Checkable Deposits
Money Defined: A Brief Review
How the Money Supply Is Determined
An economy’s money supply is controlled by its central bank.
The Demand for
Money by Individuals
Three factors influence money demand:
Expected return
Risk
Liquidity
Expected Return
The interest rate measures the opportunity cost of holding money rather than interest-bearing bonds.
The Demand for
Money by Individuals
Risk
Holding money is risky.
An unexpected increase in the prices of goods and services
Changes in the risk of holding money need not cause individuals to reduce their demand for money.
Any change in the riskiness of money causes an equal change in the riskiness of bonds.
The Demand for
Money by Individuals
Liquidity
The main benefit of holding es from its liquidity.
A rise in the average value of transactions carri